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              UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549
                                 FORM 10-K

  ( X )    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended October 31, 1996

                                     OR

  (   )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from       to

Commission file number 1-5236

                 NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
                 -------------------------------------------
           (Exact name of registrant as specified in its charter)

                      Delaware                           36-1264810
          -------------------------------            -------------------
          (State or other jurisdiction of             (I.R.S. Employer
           incorporation or organization)            Identification No.)

 455 North Cityfront Plaza Drive, Chicago, Illinois         60611
 --------------------------------------------------  -------------------
      (Address of principal executive offices)            (Zip Code)

    Registrant's telephone number, including area code (312) 836-2000

       Securities registered pursuant to Section 12(b) of the Act:

                                                   Name of Each Exchange
               Title of Each Class                  on Which Registered
-----------------------------------------------    ---------------------
Sinking fund debentures:  6-1/4%, due 1998         New York Stock Exchange
Sinking fund debentures:  9%, due 2004             New York Stock Exchange

        Securities registered pursuant to Section 12(g) of the Act:

                                    None
                                    ----

     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to such filing requirements for the past 90 days:  Yes  X   No
                                                               ---     ---


     As of January 10, 1997,  the number of shares outstanding of the
registrant's capital stock was 1,000.

                     Document Incorporated by Reference
                     ----------------------------------
Navistar Financial Corporation 1996 Annual Report on Form 10-K (Part IV)

     THE REGISTRANT IS A WHOLLY OWNED SUBSIDIARY OF NAVISTAR
INTERNATIONAL CORPORATION AND MEETS THE CONDITIONS SET FORTH IN
GENERAL INSTRUCTION J(1) (a) AND (b) OF FORM 10-K AND IS, THEREFORE,
FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

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               NAVISTAR INTERNATIONAL TRANSPORTATION CORP.

                                 FORM 10-K

                       Year Ended October 31, 1996

                                   INDEX
                                   -----

                                                                10-K Page
                                                                ---------
PART I

Item 1.  Business ............................................        3
Item 2.  Properties ..........................................        8
Item 3.  Legal Proceedings ...................................        9
Item 4.  Submission of Matters to a Vote of
           Security Holders (A) ..............................        9

PART II

Item 5.  Market for Registrant's Common Equity
           and Related Stockholder Matters ...................        9
Item 6.  Selected Financial Data (A) .........................        9
Item 7.  Management's Discussion and Analysis of
           Results of Operations and Financial Condition .....       10
Item 8.  Financial Statements and Supplementary Data .........       16
Item 9.  Changes in and Disagreements
           with Accountants on Accounting
           and Financial Disclosure ..........................       43

PART III

Item 10.  Directors and Executive Officers of the Registrant (A)     43
Item 11.  Executive Compensation (A) .........................       43
Item 12.  Security Ownership of Certain Beneficial
            Owners and Management (A) ........................       43
Item 13.  Certain Relationships and Related Transactions (A) .       43

PART IV

Item 14.  Exhibits, Financial Statement Schedule
            and Reports on Form 8-K ..........................       43

INDEPENDENT AUDITORS' REPORT .................................       41

INDEPENDENT AUDITORS' CONSENT ................................       42

SIGNATURES

Principal Accounting Officer .................................       44
Directors ....................................................       45

POWER OF ATTORNEY ............................................       45

SCHEDULE .....................................................      F-1
EXHIBITS .....................................................      E-1

(A)  Omitted or amended as the registrant is a wholly-owned subsidiary
     of Navistar International Corporation and meets the conditions
     set forth in General Instructions J(1) (a) and (b) of Form 10-K
     and is, therefore, filing this Form with the reduced disclosure
     format.

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                                    PART I

ITEM 1.  BUSINESS

     Navistar International Transportation Corp., hereinafter referred to
as "the company" and "Transportation," is the wholly owned subsidiary of a
holding company, Navistar International Corporation, hereinafter referred
to as "Navistar" and the "Parent Company."

     Transportation, operates in two principal industry segments: 
manufacturing and financial services.  Manufacturing operations are
responsible for the manufacture and marketing of medium and heavy trucks,
including school buses, mid-range diesel engines and service parts
primarily in the United States and Canada as well as in selected export
markets.  Based on assets and revenues, manufacturing operations represent
the majority of Transportation's business activities.  The financial
services operations consist of Navistar Financial Corporation (Navistar
Financial), its domestic insurance subsidiary and Transportation's foreign
finance and insurance companies.  Navistar Financial's primary business is
the retail and wholesale financing of products sold by the manufacturing
operations and its dealers within the United States and the providing of
commercial physical damage and liability insurance to the manufacturing
operations' dealers and retail customers and to the general public through
an independent insurance agency system.  Industry segment data for 1996,
1995, and 1994 is summarized in Note 15 to the Financial Statements, which
is incorporated herein by reference.

THE MEDIUM AND HEAVY TRUCK INDUSTRY

     The market in which Transportation competes is subject to
considerable volatility as it moves in response to cycles in the overall
business environment and is particularly sensitive to the industrial
sector which generates a significant portion of the freight tonnage
hauled. Government regulation has impacted and will continue to impact
trucking operations and efficiency and the specifications of equipment.

     The following table shows industry retail deliveries in the combined
United States and Canadian markets for the five years ended October 31, in
thousands of units:

                                      YEARS ENDED OCTOBER 31,
                               ------------------------------------

                               1996    1995    1994    1993    1992
                               ----    ----    ----    ----    ----

Class 5, 6 and 7 medium
  trucks and school buses .   145.8   151.8   134.2   122.5   118.3
Class 8 heavy trucks ......   195.4   228.8   205.4   166.4   125.2
                              -----   -----   -----   -----   -----
  Total ...................   341.2   380.6   339.6   288.9   243.5
                              =====   =====   =====   =====   =====

     Source: Monthly data provided by the American Automobile
Manufacturers Associations (AAMA) in the United States and Canada, and
other sources.

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     The Class 5 through 8 diesel truck market in the United States and
Canada is highly competitive.  Major domestic competitors include PACCAR,
Ford and General Motors, as well as foreign-controlled manufacturers, such
as Freightliner, Mack and Volvo GM.  In addition, manufacturers from Japan
(Hino, Isuzu, Nissan and Mitsubishi) are competing in the United States
and Canadian markets.  The intensity of this competition results in price
discounting and margin pressures throughout the industry.  In addition to
the influence of price, market position is driven by product quality,
engineering, styling, utility and distribution.

TRANSPORTATION MARKET SHARE

     Transportation delivered 94,000 Class 5 through 8 trucks, including
school buses, in the United States and Canada in fiscal 1996, an  8%
decrease from the 101,700 units delivered in 1995.  Navistar's combined
share of the Class 5 through 8 truck market was 27.5% in 1996 and 26.7% in
1995.  Transportation has been the leader in combined market share for
Class 5 through 8 trucks, including school buses, in the United States and
Canada in each of its last 16 fiscal years based on data obtained from the
American Automobile Manufacturer's Association, the United States Motor
Vehicle Manufacturer's Association and R.L. Polk & Company.

PRODUCTS

     The following table illustrates the percentage of Transportation's
manufacturing sales by class of product based on dollar amount:


                                      YEARS ENDED OCTOBER 31,
                                      -----------------------

PRODUCT CLASS                         1996     1995     1994
-------------                         ----     ----     ----
Class 5, 6 and 7 medium
  trucks and school buses .             35%      32%      32%
Class 8 heavy trucks ......             35       42       42
Service parts .............             14       12       14
Engines ...................             16       14       12
                                        --       --       --

  Total ...................            100%     100%     100%
                                       ===      ===      ===

     Transportation manufactures a full line of products in the common
carrier, private carrier, government/service, leasing, construction,
energy/petroleum and student transportation markets. Transportation offers
diesel-powered trucks and buses because of their improved fuel economy,
ease of serviceability and greater durability over gasoline-powered
vehicles.  Transportation's  Class 8 heavy trucks generally use diesel
engines purchased from outside suppliers while Class 5, 6 and 7 medium
trucks are powered by a proprietary line of mid-range diesel engines
manufactured by Transportation. Based upon information published by R.L.
Polk & Company, diesel-powered Class 5, 6 and 7 medium truck shipments
represented 87% of all medium truck shipments for fiscal year 1996 in the
United States and Canada.

     Transportation's truck and bus manufacturing operations in the United
States and Canada consist principally of the assembly of components
manufactured by its suppliers, although Transportation produces its own
mid-range diesel truck engines, sheet metal components (including cabs)
and miscellaneous other parts.

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ENGINE AND  FOUNDRY

     Transportation builds diesel engines for use in its Class 5, 6 and 7
medium trucks, school buses, selected Class 8 heavy truck models and for
sale to original equipment manufacturers in the United States and Canada.
Transportation also sells engines for industrial, agricultural and marine
applications. Transportation is the leading supplier of mid-range diesel
engines in the 160-300 horsepower range according to data supplied by 
Power Systems Research of Minneapolis, Minnesota.

     Transportation has an agreement to supply its T444E electronically
controlled diesel engine to a domestic automotive company through the year
2000 for use in all of its diesel-powered light trucks and vans.  Sales of
this engine to the automotive company currently account for approximately
87% of Transportation's  T444E sales.  Shipments of V8 and I6 engines to
all original equipment manufacturers totaled a record 163,200 units in
1996, an increase of 6% from the 154,200 units shipped in 1995.

SERVICE PARTS

     In the United States and Canada, Transportation operates 7 regional
parts distribution centers, which allows it to offer 24-hour availability
and same day shipment of the parts most frequently requested by customers.

MARKETING AND DISTRIBUTION

     Transportation's truck products are distributed in virtually all key
markets in the United States and Canada.  Transportation's truck
distribution and service network in these countries was composed of 957,
958 and 949 dealers and retail outlets at October 31, 1996, 1995 and 1994,
respectively.  Included in these totals were 504, 490 and 473 secondary
and associate locations at October 31, 1996, 1995 and 1994, respectively.

     Retail dealer activity is supported by 5 regional operations in the
United States and a general office in Canada.  Transportation has a
national account sales group, responsible for its 110 major national
account customers.   Transportation's network of 13 Used Truck Centers in
the United States provides trade-in support to the company's dealers and
national account group, and markets all makes and models of re-conditioned
used trucks  to owner-operators and fleet buyers.  Both wholesale and
retail trucks, components and service parts are exported to more than 70
countries around the world.

FINANCIAL SERVICES

     Navistar Financial is engaged in the wholesale, retail and  lease
financing of new and used trucks sold by Transportation and its dealers in
the United States.  Navistar Financial also finances wholesale accounts
and selected retail accounts receivable of Transportation.  Sales of new
products (including trailers) of other manufacturers are also financed
regardless of whether designed or customarily sold for use with
Transportation's truck products.  During 1996 and 1995, Navistar Financial
provided wholesale financing for 94%, and 93%, respectively, of the new
truck units sold by Transportation to its dealers and distributors in the
United States.

     Navistar Financial's wholly owned domestic insurance subsidiary,
Harco National Insurance Company, provides commercial physical damage and
liability insurance coverage to Transportation's dealers and retail
customers, and to the general public through an independent insurance
agency system.

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     Harbour Assurance Company of Bermuda Limited offers a variety of
programs to the company, including general liability insurance, ocean
cargo coverage for shipments to and from foreign distributors, and
reinsurance coverage for various Transportation policies.  

IMPORTANT SUPPORTING OPERATIONS

Third Party Sales Financing Agreements.   In the United States,
Transportation has an agreement with Associates Commercial Corporation to
provide wholesale financing to certain of its truck dealers and retail
financing to their customers. Navistar International Corporation Canada
also has an agreement with a subsidiary of General Electric Canadian
Holdings Limited to provide financing for Canadian dealers and customers.

RESEARCH AND DEVELOPMENT

     Research and development activities, which are directed toward the
introduction of new products and improvements of existing products and
processes used in their manufacture, totaled $101 million, $91 million,
and $88 million for  1996, 1995 and 1994, respectively.

BACKLOG

     The backlog of unfilled truck orders (subject to cancellation or
return in certain events) at October 31, 1996, 1995 and 1994 was $1,254
million, $2,581 million and $3,358 million, respectively.

     Although the backlog of unfilled orders is one of many indicators of
market demand, other factors such as changes in production rates,
available capacity, new product introductions and competitive pricing
actions may affect point-in-time comparisons.

EMPLOYEES

     Transportation employed 14,186, 16,078 and 14,909 individuals at
October 31, 1996, 1995 and 1994, respectively.

LABOR RELATIONS

     At October 31, 1996, the United Automobile, Aerospace and
Agricultural Implement Workers of America (UAW) represented 6,902 of
Transportation's active employees in the United States, and the Canadian
Auto Workers (CAW) represented 1,476 of Transportation's active employees
in Canada.  Other unions represented 1,022 of Transportation's active
employees in the United States and Canada. Transportation entered into a
collective bargaining agreement with the UAW in 1995, which expires on
October 1, 1998.  In addition, Transportation entered into a collective
bargaining agreement with the CAW in 1996, which expires on October 24,
1999.

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PATENTS AND TRADEMARKS

     Transportation continuously obtains patents on its inventions and,
thus, owns a significant patent portfolio.  Additionally, many of the
components which Transportation purchases for its products are protected
by patents that are owned or controlled by the component manufacturer. 
Transportation has licenses under third-party patents relating to its
products and their manufacture, and Transportation grants licenses under
its patents.  The royalties paid or received under these licenses are not
significant.  No particular patent or group of patents is considered by
Transportation to be essential to its business as a whole.

     Like all businesses which offer well-known products or services,
Transportation's primary trademarks are an important part of its worldwide
sales and marketing efforts, and provide instant identification of its
products and services in the marketplace.  To support these efforts,
Transportation maintains, or has pending, registrations of its primary
trademarks in those countries in which it does business or expects to do
business.

RAW MATERIALS AND ENERGY SUPPLIES

     Transportation purchases raw materials, parts and components from
numerous outside suppliers but relies upon some suppliers for a
substantial number of components for its truck products. A portion of
Transportation's requirements for raw materials and supplies is filled by
single-source suppliers.  

     The impact of an interruption in supply will vary by commodity.  Some
parts are generic to the industry while others are of a proprietary design
requiring unique tooling which would require time to recreate.  However,
Transportation's exposure to a disruption in production as a result of an
interruption of raw materials and supplies is no greater than the industry
as a whole.  In order to remedy any losses resulting from an interruption
in supply, Transportation maintains contingent business interruption
insurance for storms, fire and water damage.

     While Transportation believes that it has adequate assurances of
continued supply, the inability of a supplier to deliver could have an
adverse effect on production at certain of the company's manufacturing
locations.

IMPACT OF GOVERNMENT REGULATION

     Truck and engine manufacturers continue to face increasing
governmental regulation of their products, especially in the areas of
environment and safety.  Transportation believes its products comply with
all applicable environmental and safety regulations.

     As a diesel engine manufacturer, Transportation  has incurred
research and tooling costs to redesign its engine product lines to meet
United States Environmental Protection Agency (U.S. EPA) and California
Air Resources Board (CARB) emission standards effective for the 1994 model
year.  Transportation faces additional outlays through 1998 to meet
further tightening of these standards.  In addition to the 1998 standard,
Transportation, along with other engine manufacturers, has signed a
voluntary agreement (Statement of Principles) with U.S. EPA and CARB to
achieve new reductions in ozone-causing exhaust emissions by 2004.  As a
result of the Statement of Principles, U.S. EPA issued a Notice of
Proposed Rulemaking defining exhaust emission standards for the 2004 model
year.  A final rule is expected in the early part of 1997. Transportation
must also satisfy California's emission standards in 2002 for engines used
in medium-size vehicles (which includes vehicles up to 14,000 lbs. Gross
Vehicle Weight Rating).  Transportation expects that its diesel engines
will be able to meet all of these standards within the required time-
frame.

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         <PAGE 8>

     Emissions regulations in Canada and Mexico are similar, but not
identical, to the U.S. federal regulations.  Although Canada's regulations
impose standards equivalent only to the U.S. standards for the 1990 model
year, diesel engine manufacturers, including Transportation, have
voluntarily signed several memorandums of understanding with the Canadian
federal government, agreeing to sell only engines meeting the 1994 U.S.
emission standards in model years 1995 to 1997.  Canada has announced its
intention to conform its heavy-duty engine emission standards to the U.S.
EPA standards in 1998 and to require low-sulfur diesel fuel, as in the
U.S., beginning October 1, 1997.  Mexico has adopted the U.S. heavy diesel
engine emission standards as of the 1994 model year but has conditioned
compliance on the availability of low-sulfur diesel fuel.

     Truck manufacturers are also subject to various noise standards
imposed by federal, state and local regulations.  The engine is one of a
truck's primary noise sources, and Transportation, therefore, works
closely with original equipment manufacturers to develop strategies to
reduce engine noise.  Transportation is also subject to the National
Traffic and Motor Vehicle Safety Act (Safety Act) and Federal Motor
Vehicle Safety Standards (Safety Standards) promulgated by the National
Highway Traffic Safety Administration.  Transportation believes it is in
compliance with the Safety Act and the Safety Standards. 

     Expenditures to comply with various environmental regulations
relating to the control of air, water and land pollution at production
facilities and to control noise levels and emissions from Transportation's
products have not been material except for two sites formerly owned by
Transportation, Wisconsin Steel in Chicago, Illinois, and Solar Turbine in
San Diego, California.  In 1994, Transportation recorded a $20 million
after-tax charge as a loss of discontinued operations for environmental
liabilities and cleanup cost at these two sites.  It is not expected that
the costs of compliance with foreseeable environmental requirements will
have a material effect on Transportation's  financial position or
operating results.

ITEM 2.  PROPERTIES

     In the United States and Canada, Transportation owns and operates 9
manufacturing and assembly operations, which contain approximately 9
million square feet of floor space.  Four facilities manufacture and
assemble trucks, 2 plants manufacture diesel engines, 2 locations produce
iron castings and 1 facility produces molded fiberglass components. In
addition, Transportation owns or leases other significant properties in
the United States and Canada including vehicle and parts distribution
centers, sales offices, an engineering center and its headquarters in
Chicago. 

     Transportation's principal research and engineering facilities are
located in Fort Wayne, Indiana, and Melrose Park, Illinois.  In addition,
certain research is conducted at its manufacturing plants.

     All of Transportation's plants are being utilized and have been
maintained adequately, are in good operating condition and are suitable
for its current needs through productive utilization of the facilities. 
These facilities, together with planned capital expenditures, are expected
to meet Transportation's manufacturing needs in the foreseeable future.

     A majority of the activity of the financial services operations is
conducted from its leased headquarters in Rolling Meadows, Illinois.  The
financial services operations also lease 6 other office locations in the
United States and share office space with other locations.

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ITEM 3.  LEGAL PROCEEDINGS

     Transportation and its subsidiaries are subject to various other
claims arising in the ordinary course of business, and are parties to
various legal proceedings which constitute ordinary routine litigation
incidental to the business of the company and its subsidiaries.  In the
opinion of Transportation's management, none of these proceedings or
claims are material to the business or the financial condition of the
company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Intentionally omitted.  See the index page of this Report for
explanation.

                                    PART II

                                                             Page
                                                             ----

ITEM 5.  MARKET FOR THE REGISTRANT'S
         COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS ................                 39

ITEM 6.  SELECTED FINANCIAL DATA

    Intentionally omitted.  See the index page to this Report for
explanation.

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         <PAGE 10>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
         RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Certain statements under this caption constitute "forward-looking
statements" under the Reform Act, which involve risks and uncertainties. 
Navistar International Transportation Corp.'s actual results may differ
significantly from the results discussed in such forward-looking
statements.  Factors that might cause such a difference include, but are
not limited to, those discussed under the caption "Business Environment."

     Transportation's manufacturing operations are engaged in the
manufacture and marketing of Class 5 through 8 trucks, including school
buses, mid-range diesel engines and service parts in the United States and
Canada.  These products are also sold to distributors in selected export
markets.  Transportation's financial services operations provide
wholesale, retail and lease financing, and commercial physical damage and
liability insurance coverage to Transportation's dealers and retail
customers and to the general public through an independent insurance
agency system.

     The discussion and analysis reviews the operating and financial
results, and liquidity and capital resources of the manufacturing and
financial services operations.  Manufacturing operations include the
financial results of the financial services operations included on a one-
line basis under the equity method of accounting.  Financial services
operations include Navistar Financial Corporation (Navistar Financial),
its domestic insurance subsidiary, as well as Transportation's foreign
finance and insurance companies.  See Note 1 to the financial statements.

RESULTS OF OPERATIONS

     Transportation reported a net loss of $41 million for 1996 reflecting
lower sales and revenues and a one-time $35 million charge for termination
of its next generation truck program in the fourth quarter of 1996.  Net
income was $102 million in 1995 and $7 million in 1994.  Net income in
1994 included a $33 million charge to discontinued operations related to
environmental liabilities.  

     Transportation's manufacturing operations reported a loss before
income taxes of $87 million in 1996 compared with pretax income of $96
million in 1995 and $2 million in 1994.  The 1996 operating results
reflect a decline in demand for trucks as well as the charge for
termination of Transportation's next generation truck program.  The
increase between 1995 and 1994 reflects higher sales of trucks and diesel
engines as well as the effects of improved pricing and various cost
improvement initiatives.

     Transportation's financial services operations, which include
Navistar Financial, its domestic insurance subsidiary and Transportation's
foreign finance and insurance subsidiaries, had income before income taxes
of $83 million, $62 million and $60 million in 1996, 1995 and 1994,
respectively.

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     Navistar Financial's pretax income in 1996 was $81 million, a 37%
increase from $59 million in 1995.  The change is a result of higher
income on sales of retail notes and increased volume of wholesale
financing during the first half of 1996.  The improved gains on sales
resulted from higher margins on retail notes reflecting declining market
interest rates prior to the date of sale.  Navistar Financial's pretax
income increased $4 million in 1995 from the $55 million reported in 1994. 
The change reflects higher income from an increased volume of wholesale
financing to support the demand for trucks and improvement in Navistar
Financial's interest cost over market interest rates offset by a reduction
in margins on retail financing.

     Earnings from the foreign finance and insurance subsidiaries were $2
million, $3 million and $5 million in 1996, 1995 and 1994, respectively.

Sales and Revenues.  Industry retail sales of Class 5 through 8 trucks
totaled 341,200 units in 1996, a 10% decline from the 380,600 units sold
in 1995 but comparable to the 339,600 units sold in 1994.  Class 8 heavy
truck sales totaled 195,400 units, a decline of 15% from the 228,800 units
sold in 1995 and 5% from the 205,400 units sold in 1994.  Industry sales
of Class 5, 6 and 7 medium trucks, including school buses, totaled 145,800
units in 1996, a 4% decrease from 1995 when 151,800 units were sold, but
9% higher than the 134,200 units sold in 1994.  Industry sales of school
buses, which accounted for 22% of the medium truck market, increased 7%
over 1995 to 32,500 units.   

     Sales and revenues of $5,731 million in 1996 were 9% lower than the
$6,326 million reported in 1995 but 8% higher than the $5,330 million
reported in 1994.  Sales of trucks, mid-range diesel engines and service
parts, for 1996 totaled $5,508 million, 10% below the $6,125 million
reported for 1995 and 7% over the $5,153 million reported in 1994.

     Transportation maintained its position as sales leader in the
combined United States and Canadian Class 5 through 8 truck market in 1996
with a 27.5% market share, an increase from both the 26.7% share in 1995
and the 27.0% share in 1994.  (Sources: American Automobile Manufacturer's
Association, the United States Motor Vehicle Manufacturer's Association
and R. L. Polk  & Company.)  In 1996, Transportation's share of the Class
8 heavy truck market declined to 17.1% from 18.4% in 1995 and 19.6% in
1994, reflecting intense competition in this market.

     Shipments of mid-range diesel engines by Transportation to other
original equipment manufacturers during 1996 were a record 163,200 units,
a 6% increase from 1995 and a 25% improvement over 1994.  Higher shipments
to a domestic automotive manufacturer to meet consumer demand for the
light trucks and vans which use this engine was the primary reason for the
increase.

     Service parts sales of $760 million in 1996 increased from the $730
million reported in 1995 and were 6% higher than the $714 million reported
in 1994 as a result of dealer and national account volume growth.

     Finance and insurance revenue for 1996 was $197 million, 18% higher
than the $167 million reported in 1995 primarily as a result of higher
income on sales of retail notes.  Revenues from financial services
operations increased 10% between 1995 and 1994 primarily as a result of
higher wholesale and retail financing volume.

     Other income declined to $26 million in 1996 from $34 million in
1995, reflecting a decrease in interest income from lower cash, cash
equivalent and marketable securities balances.  Other income increased 36%
between 1995 and 1994 as a result of increased interest income  from
higher cash, cash equivalents and marketable securities balances.

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         <PAGE 12>

Costs and Expenses.  Manufacturing gross margin was 12.5% of sales in
1996, compared with 13.8% in 1995 and 12.8% in 1994.  The decrease in
gross margin is the result of lower sales volumes, more competitive
pricing and the costs of terminating the next generation truck program. 
Factors which contributed to the change in gross margin between 1995 and
1994 included higher sales volumes and improved pricing offset by overtime
costs and a provision for employee profit sharing.

     Engineering and research expense increased to $129 million in 1996
from $113 million in 1995 and $97 million in 1994 reflecting investment in
new truck and engine products as well as improvements to existing
products.

     Marketing and administrative expense was $319 million in 1996
compared with $307 million in 1995 and $264 million in 1994.  The $12
million increase in the expense between 1995 and 1996 reflects investment
in the implementation of Transportation's  strategy to reduce costs and
complexity in its manufacturing processes.  The change between 1994 and
1995 is the result of higher sales and distribution costs and an increase
in the provision for payment to employees as provided by Transportation's
performance incentive programs.

     Interest expense decreased to $168 million in 1996 from $173 million
in 1995 but was slightly higher than the $165 million reported in 1994. 
The increase in this expense in 1996 and 1995 over 1994 was the result of
higher debt balances required by the financial services operations to
finance the increased wholesale note and account balances as well as
higher interest rates in 1995.

     Finance service charges on sold receivables were $24 million in 1996,
20% lower than in 1995 but 50% higher than 1994 reflecting the pattern of
truck unit sales over this period.

LIQUIDITY AND CAPITAL RESOURCES

     Cash flow is generated from the manufacture and sale of trucks, mid-
range diesel engines and service parts as well as product financing and
insurance coverage provided to Transportation's dealers and retail
customers by the financial services operations.

     Historically, funds to finance Transportation's products are obtained
from a combination of commercial paper, short- and long-term bank
borrowings, medium- and long-term debt issues, sales of finance
receivables and equity capital.  Navistar Financial's current debt ratings
have made bank borrowings and sales of finance receivables the most
economic sources of cash.  Insurance operations are funded through
internal operations.

     Total cash, cash equivalents and marketable securities of
Transportation amounted to $348 million at October 31, 1996, $668 million
at October 31, 1995 and $624 million at October 31, 1994.

     Cash used in operations during 1996 totaled $35 million, primarily
from a net change in operating assets and liabilities of $84 million.  The
net change in operating assets and liabilities includes a $173 million
decrease in receivables offset by a reduction in accounts payable of $109
million, higher inventories and a $100 million decrease in other
liabilities.  The change in receivables and inventories reflects lower
demand for Transportation's products while the decline in accounts payable
is a result of lower production.  The change in other liabilities is the
result of the payment to employees as required by Transportation's profit
sharing agreements.

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         <PAGE 13>

     Investment programs used cash for a $73 million increase in property
and equipment leased to others and $117 million to fund capital
expenditures for truck product improvements, to increase mid-range diesel
engine capacity and for programs to improve cost performance.  These
programs were partially funded by a net decrease in marketable securities
of $83 million.  During 1996, the purchase of $1,108 million of retail
notes and lease receivables was funded with $982 million in proceeds from
the sale of receivables and principal collections of $125 million.

     Financing activities used cash of $136 million for principal payments
on long-term debt partially offset by an $81 million increase in notes and
debt outstanding under the bank revolving credit facility and asset-backed
and other commercial paper programs.

     During 1996, Navistar Financial supplied 94% of the wholesale
financing of new trucks sold to Transportation's dealers compared with 93%
in 1995 and 1994.  Navistar Financial's share of the retail financing of
new trucks sold in the United States increased to 16% in 1996 compared
with 14% in 1995 and 15% in 1994.

     The sale of finance receivables is a significant source of funding
for the financial services operations. During 1996 and 1995, Navistar
Financial sold $985 million and $740 million, respectively, of retail
notes through Navistar Finance Retail Receivables Corporation (NFRRC), a
wholly owned subsidiary. In both years, the net proceeds were used for
general working capital purposes.

     NFRRC has filed registration statements with the Securities and
Exchange Commission which provide for the issuance of up to $5,000 million
of asset-backed securities.  At October 31, 1996, the remaining shelf
registration available to NFRRC for issuance of asset-backed securities
was $2,445 million.  See Note 9 to the Financial Statements.

     Navistar Financial has a $925 million bank revolving credit facility,
and a $400 million asset-backed commercial paper program supported by a
bank liquidity facility which mature in March 2001.  Navistar Financial
also utilizes a $500 million revolving wholesale note sales trust that
provides for the continuous sale of eligible wholesale notes on a daily
basis.  The sales trust is comprised of three $100 million tranches of
investor certificates maturing serially from 1997 to 1999 and a $200
million tranche maturing in 2004.

     Transportation finances capital expenditures principally through
internally generated cash.  Capital leasing is used to fund selected
projects based on economic and operating factors.  Transportation had
outstanding capital commitments of $38 million at October 31, 1996 which
consist of truck and engine development and ongoing facility maintenance. 
In November 1996, Transportation announced plans to spend $167 million,
over the next two years to construct a new truck assembly facility in
Mexico.

     At October 31, 1996, the Canadian operating subsidiary was subject to
maximum recourse of $164 million on retail contracts and $9 million on
retail leases financed by a third party.  In addition, the company is
contingently liable for $45 million for various guarantees and buyback
programs.  Based on historic trends, however, Transportation's exposure is
not considered material.

<PAGE>
         <PAGE 14>

     The Canadian operating subsidiary and certain financial services
subsidiaries had $260 million of assets which were restricted as to
distribution to Transportation in the form of dividends, or loans and
advances at October 31, 1996.  The Parent Company and Transportation are
obligated under certain agreements to maintain Navistar Financial's income
before interest expense and income taxes at not less than 125% of its
total interest expense.  No income maintenance payments were required for
the three years ended October 31, 1996.

     It is the opinion of management that, in the absence of significant
unanticipated cash demands, current and forecasted cash flow will provide
a basis of financing operating requirements and capital expenditures. 
Management also believes that collections on the outstanding receivables
portfolios as well as funds available from various funding sources will
permit the financial services operations to meet the financing
requirements of Transportation's dealers and customers.

ENVIRONMENTAL MATTERS

     As disclosed in Notes 4 and 14 to the Financial Statements,
Transportation recorded a $33 million charge in 1994 as a loss of
discontinued operations for environmental liabilities at production
facilities of two formerly owned businesses, Wisconsin Steel and Solar
Turbine, Inc. (Solar).  The charge consisted of an $11 million payment to
be made to the Economic Development Administration and a $22 million
charge for potential cleanup costs for these sites.

     In addition, Transportation has been named a potentially responsible
party (PRP), in conjunction with other parties, in a number of cases
arising under an environmental protection law commonly known as the
Superfund law.  These cases involve sites which allegedly have received
wastes from current or former company locations.  Based on information
available to Transportation, which in most cases consists of data related
to quantities and characteristics of material generated at or shipped to
each site as well as cost estimates from PRPs and/or federal or state
regulatory agencies for the cleanup of these sites, a reasonable estimate
is calculated of Transportation's share, if any, of the probable costs and
is provided for in the financial statements.  These obligations generally
are recognized no later than completion of the remedial feasibility study
and are not discounted to their present value.  Transportation believes
that, based on these calculations, its share of the potential costs for
the cleanup of each site, other than the Wisconsin Steel and Solar sites,
will not have a material effect on Transportation's financial results. 
Transportation reviews its accruals on a regular basis.

DERIVATIVE FINANCIAL INSTRUMENTS

     As disclosed in Notes 1 and 11 to the Financial Statements,
Transportation uses derivative financial instruments to transfer or reduce
the risks of foreign exchange and interest rate volatility, and
potentially increase the return on invested funds.  Transportation's 
policy does not allow the use of derivatives for speculative purposes.  

     Transportation's manufacturing operations, as conditions warrant,
hedge foreign exchange exposure on the purchase of parts and materials
from foreign countries and its exposure from sales of manufactured
products in other countries.  Contracted purchases of commodities for
manufacturing may be hedged up to one year.  The manufacturing operations
had no foreign exchange exposure at October 31, 1996.

<PAGE>
         <PAGE 15>

     Navistar Financial uses interest rate caps, interest rate swaps and
forward interest rate contracts when needed to convert floating rate funds
to fixed and vice versa to match its asset portfolio.  Navistar Financial
also uses forward interest rate contracts to manage its exposure to
fluctuations in funding costs from the anticipated securitization and sale
of retail notes.  Between August and October 1996, Navistar Financial
entered into $400 million of forward interest rate lock agreements which
were closed in conjunction with the pricing of the sale of $487 million of
retail receivables in November 1996.  The unrecognized loss on the
agreements at October 31, 1996, which was not material, was included in
the gain recognized on the sale of receivables.

     Both manufacturing operations and Navistar Financial purchase
collateralized mortgage obligations that have relatively stable cash flow
patterns in relation to interest rate changes.

PENDING ACCOUNTING STANDARDS

     In June 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 125,  Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which Transportation must adopt for all applicable
transactions occurring after December 31, 1996.  This standard is not
expected to have a material  effect on Transportation's net income or
financial position.

BUSINESS ENVIRONMENT

     Sales of Class 5 through 8 trucks are cyclical, with demand affected
by such economic factors as industrial production, construction, demand
for consumer durable goods, interest rates and the earnings and cash flow
of dealers and customers.  Although the general economy remained stable in
1996, demand for new trucks declined. This change reflected over capacity
in the trucking industry as well as uncertainty over the future growth of
the economy, causing freight carriers to scale back plans for modernizing
and expanding their truck fleets.  As a result, the Class 5 through 8
truck market experienced a significant decline in the rate of new truck
orders.  The decline in the number of new orders has reduced
Transportation's order backlog to 20,900 units at October 31, 1996 from
47,100 units at October 31, 1995.  Accordingly, retail deliveries in 1997
will be highly dependent on the rate at which new truck orders are
received.  Transportation will evaluate order receipts and backlog
throughout the year and will balance production with demand as
appropriate.

     Transportation currently projects 1997 United States and Canadian
Class 8 heavy truck demand to be 170,000 units, a 13% decrease from 1996. 
Class 5, 6 and 7 medium truck demand, excluding school buses, is forecast
at 112,000 units, unchanged from 1996.  Demand for school buses is
expected to decline slightly in 1997 to 31,500 units.  Mid-range diesel
engine shipments by the company to original equipment manufacturers in
1997 are expected to be 176,500 units, 8% higher than in 1996. 
Transportation's service parts sales are projected to grow 6% to $809
million.

<PAGE>
         <PAGE 16>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                        Index To Financial Statements

                                                             Page
                                                             ----

Navistar International Transportation Corp.:

Statement of Income ................................          17
Statement of Financial Condition ...................          18
Statement of Cash Flow .............................          19
Notes to Financial Statements ......................          20
Independent Auditors' Report .......................          41

Finance and Insurance Subsidiaries:

     The financial statements of Navistar Financial Corporation for the
years ended October 31, 1996, 1995 and 1994 appearing on pages 9 through
40 in the Annual Report on Form 10-K for Navistar Financial Corporation
for the fiscal year ended October 31, 1996, Commission File No. 1-4146-1,
are incorporated herein by reference and filed as Exhibit 28.1 to this
Form 10-K.

<PAGE>
         <PAGE 17>

<TABLE>
<CAPTION>
STATEMENT OF INCOME
----------------------------------------------------------------------------------
For the Years Ended October 31 (Millions of dollars)
----------------------------------------------------------------------------------

                                       Navistar International Transportation Corp.
                                              and Consolidated Subsidiaries
                                       ------------------------------------------
                                         1996             1995             1994
                                        ------           ------           ------
<S>                                     <C>              <C>              <C>
Sales and revenues
Sales of manufactured products ...      $5,508           $6,125           $5,153
Finance and insurance revenue ....         197              167              152
Other income .....................          26               34               25
                                        ------           ------           ------
  Total sales and revenues .......       5,731            6,326            5,330
                                        ------           ------           ------
Costs and expenses
Cost of products and services sold       4,828            5,289            4,496
Postretirement benefits ..........         220              206              176
Engineering and research expense..         129              113               97
Marketing and
  administrative expense .........         319              307              264
Interest expense .................         168              173              165
Financing charges
  on sold receivables ............          24               30               16
Insurance claims
  and underwriting expense .......          47               50               54
                                        ------           ------           ------
  Total costs and expenses .......       5,735            6,168            5,268
                                        ------           ------           ------
  Income (loss) before
    income taxes .................          (4)             158               62
  Income tax expense .............         (37)             (56)             (22)
                                        ------           ------           ------
Income (loss) of continuing
  operations .....................         (41)             102               40
Loss of discontinued operations ..           -                -              (33)
                                        ------           ------           ------
Net income (loss) ................      $  (41)          $  102           $    7
                                        ======           ======           ======
<FN>
See Notes to Financial Statements.
</TABLE>
<PAGE>
         <PAGE 18>
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION
--------------------------------------------------------------------------------
As of October 31 (Millions of dollars)
--------------------------------------------------------------------------------


                                                        Navistar International
                                                       Transportation Corp. and
                                                       Consolidated Subsidiaries
                                                       -------------------------
                                                          1996             1995
                                                         ------           ------
<S>                                                      <C>              <C>
ASSETS
-----------------------------------
 
Cash and cash equivalents ....................           $  204           $  442
Marketable securities ........................              144              226
                                                         ------           ------
                                                            348              668
Receivables, net .............................            1,646            1,831
Inventories ..................................              463              416
Property and equipment, net ..................              770              683
Investments and other assets .................              211              199
Intangible pension assets ....................              314              284
                                                         ------           ------
Total assets .................................           $3,752           $4,081
                                                         ======           ======


LIABILITIES AND SHAREOWNER'S EQUITY
-----------------------------------

Liabilities
Accounts payable, principally trade ..........           $  820           $  933
Debt due Parent Company ......................              884              923
Debt:
  Manufacturing operations ...................              115              127
  Financial services operations ..............            1,305            1,330
Postretirement benefits liability ............            1,351            1,341
Other liabilities ............................              806              949
                                                         ------           ------
    Total liabilities ........................            5,281            5,603
                                                         ------           ------

Commitments and contingencies

Shareowner's equity
Capital stock (1,000 shares issued) ..........              786              786
Retained earnings (deficit) ..................           (2,315)          (2,308)
                                                         ------           ------
Total shareowner's equity ....................           (1,529)          (1,522)
                                                         ------           ------

Total liabilities and shareowner's equity ....           $3,752           $4,081
                                                         ======           ======
<FN>
See Notes to Financial Statements.
</TABLE>
<PAGE>
         <PAGE 19>
<TABLE>
<CAPTION> 
STATEMENT OF CASH FLOW
--------------------------------------------------------------------------------------
For the years Ended October 31 (millions of dollars)
--------------------------------------------------------------------------------------

                                                          Navistar International
                                                         Transportation Corp. and
                                                         Consolidated Subsidiaries
                                                    ----------------------------------

                                                      1996         1995         1994
                                                    --------     --------     --------
<S>                                                 <C>          <C>          <C>
Cash flow from operations
Net income (loss) ...............................   $    (41)    $    102     $      7
Adjustments to reconcile net income (loss) to cash
  provided by (used in) operations:
  Depreciation and amortization .................        101           81           72
  Additional pension funding ....................          -          (72)           -
  Provision for loss of discontinued operations .          -            -           33
  Other, net ....................................        (11)          (6)         (24)
  Change in operating assets and liabilities:
    Receivables .................................        173          (65)        (176)
    Inventories .................................        (48)          35          (19)
    Accounts payable ............................       (109)          63           83
    Other liabilities ...........................       (100)         152           48
                                                    --------     --------     --------
  Cash provided by (used in) operations .........        (35)         290           24
                                                    --------     --------     --------

Cash flow from investment programs
Purchase of retail notes and lease receivables ..     (1,108)      (1,099)        (916)
Collections/sales of retail notes
  and lease receivables .........................      1,107          850        1,176
Purchase of marketable securities ...............       (243)        (272)        (468)
Sales or maturities of marketable securities ....        326          226          483
Proceeds from property sold under sale/leaseback.          7            -           87
Capital expenditures ............................       (117)        (139)         (87)
Property and equipment leased to others .........        (73)         (19)          (5)
Other investment programs, net ..................         (8)           5           36
                                                    --------     --------     --------
  Cash provided by (used in) investment programs.       (109)        (448)         306
                                                    --------     --------     --------
Cash flow from financing activities
Principal payments on debt ......................       (136)        (121)        (222)
Issuance of debt ................................          -            -          100
Net increase (decrease)in notes and debt
  outstanding under bank revolving credit 
  facility and asset-backed and other
  commercial paper programs .....................         81          312          (28)
Net decrease in loan from
  Navistar International Corporation.............        (39)         (45)         (32)
                                                    --------     --------     --------
  Cash provided by (used in) financing activities        (94)         146         (182)
                                                    --------     --------     --------
Cash and cash equivalents
  Increase (decrease) during the year ...........       (238)         (12)         148
  At beginning of the year ......................        442          454          306
                                                    --------     --------     --------
Cash and cash equivalents at end of the year ....   $    204     $    442     $    454
                                                    ========     ========     ========

--------------------------------------------------------------------------------------
<FN>
See Notes to Financial Statements.
</TABLE>

<PAGE>
         <PAGE 20>

               NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
                      AND CONSOLIDATED SUBSIDIARIES
                               ==========

                      NOTES TO FINANCIAL STATEMENTS
                FOR THE THREE YEARS ENDED OCTOBER 31, 1996


1.   SUMMARY OF ACCOUNTING POLICIES

Basis of Consolidation

     Navistar International Transportation Corp., hereafter referred to as
"the company" and "Transportation" is the wholly owned subsidiary of
Navistar International Corporation hereafter referred to as "Parent
Company."  The consolidated financial statements include the results of
Transportation's manufacturing operations and its wholly owned financial
services subsidiaries.  The effects of transactions between the
manufacturing and financial services operations have been eliminated to
arrive at the consolidated totals.

     Transportation operates in two principal industry segments:
manufacturing and financial services.  Manufacturing operations are
responsible for the manufacture and marketing of medium and heavy trucks,
including school buses, mid-range diesel engines and service parts
primarily in the United States and Canada as well as in selected export
markets.  Based on assets and revenues, manufacturing operations represent
the majority of Transportation's business activities.  The financial
services operations consist of Navistar Financial Corporation (Navistar
Financial), its domestic insurance subsidiary and Transportation's foreign
finance and insurance companies.  Navistar Financial's primary business is
the retail and wholesale financing of products sold by the manufacturing
operations and its dealers within the United States and the providing of
commercial physical damage and liability insurance to the manufacturing
operations' dealers and retail customers and to the general public through
an independent insurance agency system.

     The distinction between current and long-term assets and liabilities
in the Statement of Financial Condition is not meaningful when finance,
insurance and manufacturing subsidiaries are combined; therefore,
Transportation has adopted an unclassified presentation.  Certain 1995 and
1994 amounts have been reclassified to conform with the presentation used
in the 1996 financial statements.

Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.

Revenue Recognition

     Manufacturing operations recognize shipments of new trucks and
service parts to independent dealers and retail customers as sales.  Price
allowances, expected in the normal course of business, and the cost of
special incentive programs are recorded at the time of sale.  Engine sales
are recognized at the time of shipment to original equipment
manufacturers.  An allowance for losses on receivables is maintained at an
amount that management considers appropriate in relation to the
outstanding receivables portfolio and it is charged when receivables are
determined to be uncollectible.

<PAGE>
         <PAGE 21>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


1.   SUMMARY OF ACCOUNTING POLICIES (continued)

Revenue Recognition (continued)

     Financial services operations recognize finance charges on retail
notes and finance leases as income over the term of the receivables on the
accrual basis utilizing the interest  method.  Interest due from interest
bearing notes and accounts is recognized on the accrual basis.  Operating
lease revenues are recognized on a straight-line basis over the life of
the lease.  Selected receivables are sold and securitized to public and
private investors with limited recourse. Gains or losses on sales of
receivables are credited or charged to revenue in the period in which the
sale occurs. Financial services operations continue to service the sold
receivables and receive a fee for such services from the investor.  An
allowance for losses is maintained at a level deemed appropriate based on
loss experience and other factors and it is charged when receivables are
determined to be uncollectible.

     Insurance premiums are earned on a prorata basis over the terms of
the policies.  Underwriting losses and outstanding loss reserve balances
are based on individual case estimates of the ultimate cost of settlement,
including actual losses, and determinations of amounts required for losses
incurred but not reported.

Cash and Cash Equivalents

     All highly liquid financial instruments with maturities of three
months or less from date of purchase, consisting primarily of bankers'
acceptances, commercial paper, United States government securities and
floating rate notes, are classified as cash equivalents in the Statement
of Financial Condition and Statement of Cash Flow.

Marketable Securities

     Marketable securities are classified as available-for-sale securities
and are reported at fair value. 

Inventories

     Inventories are valued at the lower of average cost or market.

Property and Other Long-Lived Assets 

     Significant expenditures for replacement of equipment, tooling and
pattern equipment, and major rebuilding of machine tools are capitalized. 
Depreciation and amortization are generally provided on the straight-line
basis over the estimated useful lives of the assets, which average 35
years for buildings and improvements and 8 years for machinery and
equipment.  Gains and losses on property disposals are included in other
income and expense.  The carrying amount of all long-lived assets is
evaluated periodically to determine if adjustment to the depreciation and
amortization period or to the unamortized balance is warranted.  Such
evaluation is based principally on the expected utilization of the long-
lived assets and the projected, undiscounted cash flows of the operations
in which the long-lived assets are deployed.

<PAGE>
         <PAGE 22>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


1.   SUMMARY OF ACCOUNTING POLICIES (continued)

Engineering and Research Expense

     Engineering and research expense, which includes research and
development expenses and routine ongoing costs associated with improving
existing products and manufacturing processes, totaled $129 million, $113
million and $97 million in 1996, 1995 and 1994, respectively.  Research
and development expenses, which include activities for the introduction of
new truck and diesel engine products and major improvements to existing
products and processes totaled $101 million, $91 million and $88 million
in 1996, 1995, and 1994, respectively.

Product Related Costs

     Transportation accrues warranty expense at the time of end product
sale.  Product liability expense is accrued based on the estimate of total
future payments to settle product liability claims.

Income Taxes

     The Parent Company files a consolidated U.S. federal income tax
return which includes Transportation and its U.S. subsidiaries. 
Transportation has a tax allocation agreement with the Parent Company (Tax
Agreement) which requires Transportation to compute its separate federal
income tax expense based on its adjusted book income.  Any resulting tax
liability is paid to the Parent Company.  In addition, under the Tax
Agreement, Transportation is required to pay to the Parent Company any tax
payments received from its subsidiaries.  The effect of the Tax Agreement
is to allow the Parent Company rather than Transportation to utilize U.S.
operating losses and net operating loss carryforwards generated in earlier
years.

Derivative Financial Instruments

     Transportation uses derivatives to transfer or reduce risks of
foreign exchange and interest rate volatility and to potentially increase
the return on invested funds.  Navistar Financial, uses a variety of
contracts to manage its exposure to fluctuations in funding costs from the
anticipated securitization and sale of retail notes.  All derivatives are
held for purposes other than trading, and Transportation's policy does not
allow the use of derivatives for speculative purposes.  Gains and losses
on hedges of existing assets or liabilities, firm commitments or
anticipated transactions are included in the carrying amounts of the
related asset or liability and recognized in income when the hedged event
occurs.  Gains or losses related to qualifying hedges of anticipated sales
of receivables are deferred and are recognized in income when the
receivables are sold.

Pending Accounting Standard

     In June 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 125,  Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which Transportation must adopt for all applicable
transactions occurring after December 31, 1996.  The standard is not
expected to have a material effect on Transportation's net income or
financial position.

<PAGE>
         <PAGE 23>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


2.   POSTRETIREMENT BENEFITS

     Transportation provides postretirement benefits to substantially all
of its employees.  Costs associated with postretirement benefits include
pension expense for employees, retirees and surviving spouses, and
postretirement health care and life insurance expense for employees,
retirees, surviving spouses and dependents.  In addition, as part of the
1993 restructured retiree health care and life insurance plans, profit
sharing payments to an independent retiree trust are required.  The cost
of postretirement benefits is segregated as a separate component in the
Statement of Income and is as follows:

Millions of dollars                      1996        1995        1994
-----------------------------------------------------------------------
Pension expense ....................    $   160     $   110     $   108
Health/life insurance ..............         60          70          64
Profit sharing provision to Trust ..          -          26           4
                                        -------     -------     -------

Total postretirement
  benefits expense .................    $   220     $   206     $   176
                                        =======     =======     =======

     In the Statement of Financial Condition, the postretirement benefits
liability of $1,351 million in 1996 and $1,341 million in 1995 includes
$607 million and $587 million, respectively, for pension and $744 million
and $754 million, respectively, for postretirement health care and life
insurance benefits.

Pension Benefits

     Generally, the pension plans are noncontributory with benefits
related to an employee's length of service and compensation rate. 
Transportation's policy is to fund its pension plans in accordance with
applicable United States and Canadian government regulations and to make
additional payments as funds are available to achieve full funding of the
vested accumulated benefit obligation.  The pension plans vary in the
extent to which they are funded, but for plan years which ended during the
current year, all legal funding requirements have been met.  Plan assets
are invested primarily in dedicated portfolios of long-term fixed income
securities with more recent contributions invested in equity securities.

Pension Expense

     Net pension expense included in the Statement of Income is composed
of the following:

Millions of dollars                      1996        1995        1994
-----------------------------------------------------------------------
Service cost for benefits
  earned during the period .........    $    34     $    24     $    34
Interest on projected
  benefit obligation ...............        231         232         211
Net amortization costs and other ...        104          57          50
Less expected return on assets .....       (209)       (203)       (187)
                                        -------     -------     -------
Net pension expense ................    $   160     $   110     $   108
                                        =======     =======     =======

Actual return on assets ............    $   188     $   398     $  (127)
                                        =======     =======     =======
<PAGE>
         <PAGE 24>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


2.   POSTRETIREMENT BENEFITS (continued)

Pension Expense (continued)

     "Amortization costs" shown in the above table include amortization of
cumulative gains and losses over the expected remaining service life of
employees, amortization of the initial transition liability over 15 years
and amortization of plan amendments, recognized over the remaining service
life of employees, except for those plan amendments arising from
negotiated labor contracts, which are amortized over the length of the
contract.

Pension Assets and Liabilities

     Included in the Statement of Financial Condition is the minimum
pension liability for certain unfunded pension plans.  The adjustment for
the minimum pension liability in the amounts of $623 million and $628
million are offset by intangible pension assets of $314 million and $284
million and accumulated reductions in shareowner's equity of $309 million
and $344 million at October 31, 1996 and October  31, 1995, respectively. 
The minimum pension liability will change from year to year as a result of
revisions to actuarial assumptions, experience gains or losses and
settlement rate changes.

     The funded status of Transportation's plans as of October 31, 1996
and 1995 and a reconciliation with amounts recognized in the Statement of
Financial Condition are provided below.

                                Plans in Which        Plans in Which
                                 Assets Exceed     Accumulated Benefits
                             Accumulated Benefits      Exceed Assets
                            ---------------------  --------------------
Millions of dollars            1996       1995        1996       1995
-----------------------------------------------------------------------
Actuarial present value of:
  Vested benefits .......... $    (59)   $   (51)   $ (2,672)  $ (2,612)
  Nonvested benefits .......       (7)        (5)       (270)      (270)
                             --------   --------    --------   --------
    Accumulated benefit
      obligation ...........      (66)       (56)     (2,942)    (2,882)
Effect of projected future
  compensation levels ......       (3)        (4)        (23)       (27)
                             --------   --------    --------   --------
Projected benefit
  obligation ...............      (69)       (60)     (2,965)    (2,909)
Plan assets at fair value ..       91         87       2,336      2,295
                             --------   --------    --------   --------
Funded status at October 31.       22         27        (629)      (614)
Unamortized pension costs:
    Net losses .............       11          9         332        372
    Prior service costs ....        6          1         113         50
    (Asset) liability at
      date of transition ...       (1)        (1)        200        233
Adjustment for the minimum
  liability ................        -          -        (623)      (628)
                             --------   --------    --------   --------
Net asset (liability) ...... $     38   $     36    $   (607)  $   (587)
                             ========   ========    ========   ========

<PAGE>
         <PAGE 25>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


2.   POSTRETIREMENT BENEFITS (continued)

Pension Assets and Liabilities (continued)

     The weighted average rate assumptions used in determining pension
costs and the projected benefit obligation were:

                                         1996        1995        1994
-----------------------------------------------------------------------
Discount rate used to determine
  present value of projected
  benefit obligation at end of year.     8.1%        7.8%        9.3%
Expected long-term rate of
  return on plan assets for the year     9.0%        9.9%        8.1%
Expected rate of increase
  in future compensation levels ....     3.5%        3.5%        3.5%

Other Postretirement Benefits

     In addition to providing pension benefits, Transportation provides
health care and life insurance for a majority of its retired employees,
spouses and certain dependents in the United States and Canada.

     In 1993, a trust was established to provide a vehicle for funding the
health care liability through Transportation's contributions and retiree
premiums.  The funds in this trust are invested primarily in equity
securities.  Transportation  is required to make a prefunding contribution
of $200 million to the trust on or prior to June 30, 1998.

     The components of expense for other postretirement benefits included
in the Statement of Income are as follows:

Millions of dollars                      1996        1995        1994
-----------------------------------------------------------------------
Service cost for benefits
  earned during the year ...........    $    14     $    10     $    10
Interest cost on the accumulated
  benefit obligation ...............         84          90          81
Less expected return on assets .....        (38)        (30)        (27)
                                        -------     -------     -------
Net other postretirement
  benefits expense .................    $    60     $    70     $    64
                                        =======     =======     =======

Actual return on assets ............    $    46     $    65     $    12
                                        =======     =======     =======

     The funded status of other postretirement benefits as of October 31
is as follows:

Millions of dollars                                  1996        1995
-----------------------------------------------------------------------
Accumulated other postretirement
  benefit obligation (APBO):
Retirees and their dependents ......                $  (773)    $  (729)
Active employees eligible to retire                    (244)       (201)
Other active participants ..........                   (208)       (227)
                                                    -------     -------
Total APBO .........................                 (1,225)     (1,157)
Plan assets at fair value ..........                    401         364
                                                    -------     -------
APBO in excess of plan assets ......                   (824)       (793)
Unamortized prior service cost .....                     (6)          -
Unrecognized net  loss .............                     86          39
                                                    -------     -------
Net liability ......................                $  (744)    $  (754)
                                                    =======     =======
<PAGE>
         <PAGE 26>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


2.   POSTRETIREMENT BENEFITS (continued)

Other Postretirement Benefits (continued)

     The weighted average expected return on plan assets was 10.5% for
1996, 10% for 1995 and 9% for 1994.  The weighted average of discount
rates used to determine the accumulated other postretirement benefit
obligation was 8.2% and 7.8% at October 31, 1996 and 1995, respectively. 
For 1997, the weighted average rate of increase in the per capita cost of
covered health care benefits is projected to be 8.2%.  The rate is
projected to decrease to 5.0% by the year 2004 and remain at that level
each year thereafter.  If the cost trend rate assumptions were increased
by one percentage point for each year, the accumulated postretirement
benefit obligation would increase by approximately $117 million and the
associated expense recognized for the year ended October 31, 1996 would
increase by an estimated $8 million.

3.   INCOME TAXES

     The Parent Company files a consolidated U.S. federal income tax
return which includes Transportation and its U.S. subsidiaries.  Under the
tax allocation agreement with the Parent Company (Tax Agreement), if
Transportation records income, it is required to compute its federal
income tax expense based on such income and report it in the Statement of
Income; if a loss is recorded, the federal income tax benefit from such
loss is recorded by the Parent Company.  Any resulting tax liability is
paid to the Parent Company.  In addition, under the Tax Agreement,
Transportation is required to pay to the Parent Company any tax payments
received from its subsidiaries.  The effect of the Tax Agreement is to
allow the Parent Company, rather than Transportation, to utilize U.S.
operating losses and net operating loss (NOL) carryforwards generated in
earlier years.  As of October 31, 1996, Transportation's subsidiaries had
$35 million of domestic NOL carryforwards available to offset their future
taxable income.

     The domestic and foreign components of income (loss) of continuing
operations before income taxes consist of the following:

Millions of dollars                      1996        1995        1994
-----------------------------------------------------------------------
Domestic ...........................    $    (1)    $   147     $    49
Foreign ............................         (3)         11          13
                                        -------     -------     -------
Total income (loss)
  before income taxes ..............    $    (4)    $   158     $    62
                                        =======     =======     =======

     Taxes on income (loss) of continuing operations are analyzed by
categories as follows:

Millions of dollars                      1996        1995        1994
-----------------------------------------------------------------------
Current:
  Federal ..........................    $    30     $    46     $    15
  State and local ..................          7           9           4
                                        -------     -------     -------
    Total current expense ..........         37          55          19
Deferred expense ...................          -           1           3
                                        -------     -------     -------
Total income tax expense
  of continuing operations .........    $    37     $    56     $    22
                                        =======     =======     =======

<PAGE>
         <PAGE 27>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


3.   INCOME TAXES (continued)

     The difference between the provision for income taxes and income
taxes computed using the U.S. federal statutory rate is as follows:

Millions of dollars                      1996        1995        1994
-----------------------------------------------------------------------
Amount computed using
  the U.S. federal statutory rate ..    $    (1)    $      55   $    22
Increase  (decrease)
  in taxes resulting from:
    State income taxes, net ........          7             9         4
    Difference between U.S.
      and foreign tax rates ........          1            (4)       (5)
    Current year loss
      for which no benefit
      is available  ................         29           -           -
Other ..............................          1          (4)          1
                                        -------     -------     -------
Provision for income taxes
  of continuing operations .........    $    37     $    56     $    22
                                        =======     =======     =======

     Pursuant to the Tax Agreement, all U.S. income taxes are paid by the
Parent Company to the federal tax authorities.  Transportation's
consolidated tax payments to certain state and local governments were $2
million each year during 1996, 1995 and 1994, respectively.

     Taxpaying entities of Transportation offset all deferred tax assets
and liabilities within each tax jurisdiction and present them in a single
amount in the Statement of Financial Condition.  The components of the
deferred tax asset (liability)  at October 31 are as follows:

Millions of dollars                                  1996        1995
-----------------------------------------------------------------------
United States
-------------
Deferred tax asset--net operating
  loss carryforwards ...............                $    13     $    18
Less valuation allowance ...........                    (13)        (18)
                                                    -------     -------
Net deferred tax asse  .............                $     -     $     -
                                                    =======     =======
Foreign
-------
Deferred tax assets:
Net operating loss carryforwards ...                $     2     $     -
Postretirement benefits ............                     19          19
                                                    -------     -------
Total deferred tax assets ..........                     21          19
Less valuation allowance ...........                    (21)        (19)
                                                    -------     -------
Net deferred tax assets ............                      -           -
Deferred tax liabilities--prepaid
  pension assets ...................                    (16)        (16)
                                                    -------     -------
Net deferred tax liabilities .......                $   (16)    $   (16)
                                                    =======     =======

     A valuation allowance has been provided for those NOL carryforwards
and temporary differences which are estimated to expire before they are
utilized.  The total valuation allowance decreased $3 million during 1996
resulting from utilization of domestic NOL carryforwards by
Transportation's subsidiaries for which a full allowance had previously
been provided, net of tax benefits associated with foreign NOLs.



<PAGE>
         <PAGE 28>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)

 
4.   DISCONTINUED OPERATIONS

     In the fourth quarter of 1994, Transportation recorded a $33 million
charge as a loss of discontinued operations for environmental liabilities
at production facilities of two formerly owned businesses, Wisconsin Steel
and Solar Turbine, Inc. This charge, which included an $11 million
settlement for various environmental related commercial issues and a $22
million charge for cleanup costs for these sites, was included in Other
Liabilities.  See also Note 14.

5.   MARKETABLE SECURITIES

     The fair value of marketable securities is estimated based on quoted
market prices, when available.  If a quoted price is not available, fair
value is estimated using quoted market prices for similar financial
instruments.

     Information related to Transportation's  marketable securities at
October 31 is as follows:
                                1996                    1995
                         -------------------     --------------------
                         Amortized     Fair      Amortized     Fair 
Millions of dollars        Cost        Value       Cost        Value
---------------------------------------------------------------------
Corporate securities      $   32      $   32       $   33      $   33
U.S. government
  securities ..........       49          48          139         140
Mortgage and asset-
  backed securities ...       42          42           32          33
Foreign government 
  securities ..........        5           5            9           9
                          ------      ------       ------      ------
    Total debt
     securities .......      128         127          213         215
Equity securities .....       14          17           10          11
                          ------      ------       ------      ------

Total marketable
  securities ..........   $  142      $  144       $  223      $  226
                          ======      ======       ======      ======

     Gross unrealized gains and losses on marketable securities at October
31, 1996 and 1995 are not material.

     Contractual maturities of marketable debt securities at October 31
are as follows: 
                                1996                    1995
                         -------------------     --------------------
                         Amortized     Fair      Amortized     Fair 
Millions of dollars        Cost        Value       Cost        Value
---------------------------------------------------------------------
Due in one year or less   $   22      $   21       $  105      $  105
Due after one year
  through five years ..       35          35           38          39
Due after five years
  through ten years ...       23          23           27          27
Due after ten years ...        6           6           11          11
                          ------      ------       ------      ------
                              86          85          181         182
Mortgage and asset-
  backed securities ...       42          42           32          33
                          ------      ------       ------      ------

Total debt securities .   $  128      $  127       $  213      $  215
                          ======      ======       ======      ======


<PAGE>
         <PAGE 29>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


5.   MARKETABLE SECURITIES (continued)

     Proceeds from sales or maturities of investments in securities were
$326 million during 1996 and $226 million during 1995. Gross gains and
losses realized on such sales or maturities were not material for each of
the two years.  Shareowner's equity includes unrealized holding gains of
$2 million at October 31, 1996 and $3 million at October 31, 1995.    At
October 31, 1996 and 1995, a domestic insurance subsidiary had $17 million
and $23 million, respectively, of marketable securities on deposit with
various state departments of insurance or otherwise not available.  These
securities are included in total marketable securities balances at October
31, 1996 and 1995.

6.  RECEIVABLES

     Receivables at October 31 are summarized by major classification as
follows:

Millions of dollars                                  1996        1995
-----------------------------------------------------------------------
Accounts receivable ...............                 $   551     $   565
Retail notes and lease financing ..                     733         747
Wholesale notes ...................                     101         268
Amounts due from sales
  of receivables ..................                     264         248
Reinsurance balance receivables ...                      28          31
Allowance for losses ..............                     (31)        (28)
                                                    -------     -------
    Total receivables, net ........                 $ 1,646     $ 1,831
                                                    =======     =======

     Navistar Financial purchases the majority of the wholesale notes
receivable and some retail notes and accounts receivable arising from
Transportation's operations in the United States.

     A portion of Navistar Financial's funding for retail and wholesale
notes comes from sales of receivables by Navistar Financial to third
parties with limited recourse.  Proceeds from sales of retail notes
receivable, net of underwriting costs, were $982 million in 1996, $727
million in 1995 and $995 million in 1994. Uncollected sold retail and
wholesale receivable balances totaled $1,866 million and $1,673 million as
of October 31, 1996 and 1995, respectively.

     Contractual maturities of accounts receivable, retail notes and lease
financing and wholesale notes, including unearned finance income, at
October 31, 1996 were:  1997 - $851 million, 1998 - $243 million, 1999 -
$186 million, 2000 - $142 million, 2001 - $76 million, and 2002 and
thereafter - $14 million.  Unearned finance income totaled $127 million at
October 31, 1996.

<PAGE>
         <PAGE 30>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


7.  INVENTORIES
 
     Inventories at October 31 are as follows:

Millions of dollars                                  1996        1995
-----------------------------------------------------------------------
Finished products .................                $    242     $   167
Work in process ...................                      97          91
Raw materials and supplies ........                     124         158
                                                    -------     -------

Total inventories .................                 $   463     $   416
                                                    =======     =======

8.  PROPERTY AND EQUIPMENT
 
     At October 31, property and equipment includes the following:

Millions of dollars                                  1996        1995
-----------------------------------------------------------------------
Land ..............................                $     12     $    11
                                                    -------     -------
Buildings, machinery
  and equipment at cost:
    Plants ........................                   1,299       1,223
    Distribution ..................                      79          75
    Other .........................                     222         138
                                                    -------     -------

        Subtotal ..................                   1,600       1,436
                                                    -------     -------

    Total property ................                   1,612       1,447
    Less accumulated depreciation
      and amortization ............                    (842)       (764)
                                                    -------     -------
        Total property
          and equipment, net ......                 $   770     $   683
                                                    =======     =======

     Total property includes  property under capitalized lease obligations
of $25 million at October 31, 1996 and $24 million at October 31, 1995. 
In addition total property includes vehicles under operating lease to
third parties of  $116 million at October 31, 1996 and $49 million at
October 31, 1995.

<PAGE>
         <PAGE 31>

                               =========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


9.  DEBT

Debt Due Parent Company

Millions of dollars                                 1996        1995
---------------------------------------------------------------------
Manufacturing operations
  Current maturities of debt
    due Parent Company ............               $    42     $    38
                                                  -------     -------
  Subordinated Parent Company Note
    9.05% Stock Purchase Agreement
      (Class B Common), due 2003 ..                   349         392
    9.0% Loan Agreement, due 2013 .                   493         493
                                                  -------     -------
  Long-term debt due Parent Company                   842         885
                                                  -------     -------

Total debt due Parent Company .....               $   884     $   923
                                                  =======     =======
Debt

Millions of dollars                                 1996        1995
---------------------------------------------------------------------
Manufacturing operations
  Notes payable and current
    maturities of long-term debt ..               $    14     $    10
                                                  -------     -------
  6 1/4% Sinking Fund Debentures,
    due 1998 ......................                     3           6
  9% Sinking Fund Debentures,
    due 2004 ......................                    53          60
  8% Secured Note,
    due 2002 secured by plant assets                   26          31
  Capitalized leases and other ....                    19          20
                                                  -------     -------
      Total long-term debt ........                   101         117
                                                  -------     -------
Manufacturing operations debt .....                   115         127
                                                  -------     -------
Financial services operations 
  Commercial paper ................                    99          50
  Current maturities
    of long-term debt .............                     -         118
                                                  -------     -------
      Total short-term debt .......                    99         168
                                                  -------     -------
  Asset-backed commercial paper
    program, variable rate,
    due March 2001 ................                   402         302
  Bank revolver, variable rate,
    due March 2001 ................                   704         760
                                                  -------     -------
      Total senior debt ...........                 1,106       1,062
                                                  -------     -------
  Subordinated Term Debt
    - Senior notes, 8 7/8%,
      due November 1998 ...........                   100         100
                                                  -------     -------
      Total long-term debt ........                 1,206       1,162
                                                  -------     -------
Financial services operations debt.                 1,305       1,330
                                                  -------     -------

Total debt ........................               $ 1,420     $ 1,457
                                                  =======     =======

<PAGE>
         <PAGE 32>

                               =========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


9.  DEBT (continued)

     Consolidated interest payments were $168 million, $169 million and
$181 million in 1996, 1995 and 1994, respectively.

     Navistar Financial issues commercial paper with varying terms and has
short-term borrowings with various banks on a noncommitted basis. 
Compensating cash balances and commitment fees are not required under
these borrowings.

     The aggregate annual maturities and sinking fund requirements for
debt for the years ended October 31 are as follows:

                                                     Financial
                                     Manufacturing    Services
Millions of dollars                    Operations    Operations    Total
-------------------------------------------------------------------------
1997 ...............................    $    56       $    99     $   155
1998 ...............................         68             -          68
1999 ...............................         66           100         166
2000 ...............................         70             -          70
2001 ...............................         76         1,106       1,182
Thereafter .........................        663             -         663
 
Weighted average interest rate
  on total debt, including short-term
  debt, and the effect of discounts
  and related amortization
  for the years ended:
    October 31, 1996 ...............        9.0%          6.5%        7.7%
    October 31, 1995 ...............        9.1%          7.4%        8.3%


     Effective March 29, 1996, Navistar Financial amended and restated its
bank revolving credit facility and its asset-backed commercial paper
(ABCP) program, extending the maturity date of each facility to March
2001.  In addition, the commitment of the bank revolving credit facility
was expanded to $925 million, the ABCP facility was increased to $400
million, and a new pricing and fee schedule was established.  The
available funding under the ABCP program is $414 million, comprised of the
$400 million liquidity facility and $14 million of trust certificates
issued in connection with the ABCP Trust.

     Under the terms of the ABCP program, a special purpose wholly owned
subsidiary of Navistar Financial will purchase retail notes and lease
receivables.  All assets of the subsidiary will be pledged or sold to a
trust that will fund the receivables with investment grade commercial
paper.  The assets may also be sold to the trust.

     Available funding under the amended and restated credit agreement and
ABCP program was $233 million, of which $99 million was used to back
short-term debt at October 31, 1996.  The remaining $134 million when
combined with unrestricted cash and cash equivalents made $141 million
available to fund the general business purposes of Navistar Financial at
October 31, 1996.

<PAGE>
         <PAGE 33>

                               =========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


9.  DEBT (continued)

     Navistar Financial's wholly owned subsidiaries, Navistar Financial
Retail Receivables Corporation (NFRRC) and Navistar Financial Securities
Corporation (NFSC), have a limited purpose of purchasing retail and
wholesale receivables, respectively, and transferring an undivided
ownership interest in such notes to investors in exchange for pass-through
notes and certificates.  The subsidiaries have limited recourse on the
sold receivables and their assets are available to satisfy the claims of
their creditors prior to such assets becoming available to Navistar
Financial or affiliated companies.

     NFSC has in place $500 million of revolving wholesale note sales
trusts that provide for the continuous sale of eligible wholesale notes on
a daily basis.  The sales trusts are comprised of three $100 million
tranches of investor certificates maturing serially from 1997 to 1999 and
a $200 million tranche maturing in 2004.  

     During 1996, Navistar Financial sold $985 million of retail notes,
net of unearned finance income, through NFRRC in two separate sales to two
individual owner trusts which in turn sold $946 million of notes and $39
million of certificates to investors.  The net proceeds, after
underwriting costs and credit enhancements, of $935 million were used by
Navistar Financial for general working capital purposes. At October 31,
1996, the remaining shelf registration available to NFRRC for issuance of
asset-backed securities was $2,445 million.

     In November 1996, Navistar Financial sold $487 million of retail
notes through NFRRC.  The net proceeds of $473 million were used for
general working capital purposes. 

10.  OTHER LIABILITIES
 
     Major classifications of other liabilities at October 31 are as
follows:

Millions of dollars                                 1996        1995
---------------------------------------------------------------------
Product liability and warranty ....               $   293     $   294
Loss reserves and unearned premiums                   113         118
Employee incentive programs .......                    10         104
Payroll, commissions
  and employee related benefits ...                    73          80
Long-term disability
  and workers' compensation .......                    55          66
Taxes .............................                    46          42
Environmental .....................                    23          25
Interest ..........................                     9          12
Other .............................                   184         208
                                                  -------     -------
    Total other liabilities .......               $   806     $   949
                                                  =======     =======

     During the fourth quarter of 1996, Transportation recorded a one-time
$35 million charge for termination of its next generation truck program.

<PAGE>
         <PAGE 34>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


11.  FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

     The carrying amounts of financial instruments, as reported in the
Statement of Financial Condition and described in various Notes to the
Financial Statements, and their fair values at October 31 are as follows:

                                1996                    1995
                         -------------------     -------------------
                         Carrying      Fair       Carrying     Fair 
Millions of dollars       Amount       Value       Amount      Value
--------------------------------------------------------------------
Receivables, net ......   $1,646      $1,649       $1,831     $1,844
Investments
  and other assets ....      211         219          199        199
Debt ..................    2,304       2,358        2,380      2,532


     Cash and cash equivalents approximate fair value.  The cost and fair
value of marketable securities are disclosed in Note 5.

     Customer receivables, wholesale notes and retail and wholesale
accounts and other variable-rate retail notes approximate fair value as a
result of the short-term maturities of the financial instruments.  The
fair value of  truck retail notes is estimated based on quoted market
prices of similar sold receivables.  The fair value of amounts due from
sales of receivables is estimated by discounting expected cash flows at
estimated current market rates.

     The fair value of investments and other assets is estimated based on
quoted market prices or by discounting future cash flows.

     The short-term debt and variable-rate borrowings under Navistar
Financial's bank revolving credit agreement, which is repriced frequently,
approximate fair value.  The fair value of long-term debt is estimated
based on quoted market prices, when available.  If a quoted market price
is not available, fair value is estimated using quoted market prices for
similar financial instruments or discounting future cash flows.

<PAGE>
         <PAGE 35>

                               =========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


11.  FINANCIAL INSTRUMENTS   (continued) 

Derivatives Held or Issued for Purposes Other Than Trading

     Transportation uses derivatives to transfer or reduce risks of
foreign exchange and interest rate volatility and to potentially increase
the return on invested funds.

     Transportation purchases collateralized mortgage obligations (CMOs)
that have predetermined fixed-principal payment patterns which are
relatively certain.  These instruments totaled $42 million at October 31,
1996.  At October 31, 1996,  the unrecognized gain on the CMOs was not
material.

     Navistar Financial manages its exposure to fluctuations in interest
rates by limiting the amount of fixed rate assets funded with variable
rate debt, by selling fixed rate retail receivables on a fixed rate basis
and, to a lesser extent, by utilizing financial derivative instruments. 
These instruments may include interest rate swaps, interest rate caps and
forward interest rate contracts.  Navistar Financial enters into forward
interest rate contracts to manage its exposure to fluctuations in funding
costs from the anticipated securitization and sale of retail notes.

     Between August and October 1996, Navistar Financial entered into $400
million of forward interest rate lock agreements on a Treasury note
maturing in 1998 related to the anticipated November 1996 sale of retail
receivables.  These hedge agreements were closed in conjunction with the
pricing of the sale, and the loss at October 31, 1996, which was not
material, was deferred and included in the gain recognized on the sale of
receivables in November 1996.

<PAGE>
         <PAGE 36>

                               =========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


12.  COMMITMENTS, CONTINGENCIES, RESTRICTED ASSETS, CONCENTRATIONS
     AND LEASES

Commitments, contingencies and restricted assets

     At October 31, 1996, commitments for capital expenditures in progress
were approximately $38 million. 

     Navistar Financial's maximum exposure under all receivable sale
recourse provisions at October 31, 1996 was $215 million; however,
Navistar Financial's exposure is not considered material.

     At October 31, 1996, the Canadian operating subsidiary was
contingently liable for retail customers' contracts and leases financed by
a third party.  Transportation is subject to maximum recourse of $164
million on retail contracts and $9 million on retail leases. In addition,
as of October 31, 1996, Transportation is contingently liable for
approximately $45 million for various guarantees and buyback programs;
however, based on historical loss trends, Transportation's exposure is not
considered material.

     The Canadian operating subsidiary and certain subsidiaries included
in financial services operations are parties to agreements which restrict
the amounts which can be distributed to Transportation in the form of
dividends or loans and advances which can be made.  As of October 31,
1996, these subsidiaries had $385 million of net assets of which $260
million was restricted as to distribution.

     The Parent Company and Transportation are obligated under certain
agreements with public and private lenders of Navistar Financial to
maintain the subsidiary's income before interest expense and income taxes
at not less than 125% of its total interest expense.  No income
maintenance payments were required for the 3 years ended October 31, 1996.

Concentrations

     At October 31, 1996, Transportation employed 9,043 hourly workers and
5,143 salaried workers in the United States and Canada.  Approximately 91%
of the hourly employees and 23% of the salaried employees are represented
by unions.  Of these represented employees, 89% of the hourly workers and
93% of the salaried workers are represented by the United Automobile,
Aerospace, and Agricultural Implement Workers of America (UAW) or the
National Automobile, Aerospace, and Agricultural Implement Workers of
Canada (CAW).  The collective bargaining agreements with the UAW and the
CAW expire on October 1, 1998 and October 24, 1999, respectively.

     Reflecting higher consumer demand for light trucks and vans, sales of
mid-range diesel engines to a domestic automobile manufacturer have
increased from 10% of consolidated sales and revenues in 1994 to 12% in
1995 and 14% in 1996.

<PAGE>
         <PAGE 37>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


12.  COMMITMENTS, CONTINGENCIES, RESTRICTED ASSETS, CONCENTRATIONS
     AND LEASES (continued)

Leases

     Transportation has long-term noncancellable leases for use of various
equipment and facilities.  Lease terms are generally for 5 to 25 years
and, in many cases, provide for renewal options.  Transportation is
generally obligated for the cost of property taxes, insurance and
maintenance.  Transportation leases office buildings, distribution
centers, furniture and equipment, machinery and equipment, and computer
equipment.

     The majority of Transportation's lease payments are for operating
leases.  At October 31, 1996, future minimum lease payments under
operating leases having lease terms in excess of one year are:  1997 - $30
million, 1998 - $27 million, 1999 - $26 million, 2000 - $25 million, 2001
- $17 million and thereafter - $21 million.  Total operating lease expense
was $32 million in 1996, $37 million in 1995 and $34 million in 1994. 
Income received from sublease rentals was $6 million in 1996, 1995 and
1994, respectively.

13.  LEGAL PROCEEDINGS

     Transportation and its subsidiaries are subject to various claims
arising in the ordinary course of business, and are parties to various
legal proceedings which constitute ordinary routine litigation incidental
to the business of the company and its subsidiaries.  In the opinion of
Transportation's management, none of these proceedings or claims is
material to the business or the financial condition of  Transportation.

14.  ENVIRONMENTAL MATTERS

     In the fourth quarter of 1994, Transportation recorded a $33 million
charge, as a loss of discontinued operations related to environmental
liabilities at production facilities of two formerly owned businesses,
Wisconsin Steel and Solar Turbine, Inc. (Solar).  Transportation reached
an agreement with the Economic Development Administration, a division of
the U.S. Department of Commerce, in 1994 in settlement of commercial and
environmental disputes related to the Wisconsin Steel property.  At
October 31, 1996, the final consent decree remained subject to approval by
the U.S. Department of Justice and by Transportation.

     Transportation has been named a potentially responsible party (PRP),
in conjunction with other parties, in a number of cases arising under an
environmental protection law known as the Superfund law.  These cases
involve sites which allegedly have received wastes from current or former
company locations.  Based on information available to Transportation,
which in most cases consists of data related to quantities and
characteristics of material generated at or shipped to each site as well
as cost estimates from PRPs and/or federal or state regulatory agencies
for the cleanup of these sites, a reasonable estimate is calculated of
Transportation's share, if any, of the probable costs and is provided for
in the financial statements.  These obligations generally are recognized
no later than completion of the remedial feasibility study and are not
discounted to their present value.  Transportation believes that, based on
these calculations, its share of the potential additional costs for the
cleanup of each site, other than the Wisconsin Steel and Solar sites, will
not have a material effect on Transportation's financial results. 
Transportation  reviews its accruals on a regular basis.

<PAGE>
         <PAGE 38>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


15.  INDUSTRY SEGMENT DATA

     Information concerning operations by industry segment is as follows:

                                                Financial
                               Manufacturing     Services
Millions of dollars              Operations     Operations    Consolidated
--------------------------------------------------------------------------
October 31, 1996
----------------
Total sales and revenues ....      $5,527         $  258         $5,731
Operating profit ............         689            109            749
Depreciation and amortization          90             11            101
Capital expenditures ........         117              -            117
Identifiable assets .........       2,241          1,843          3,752

October 31, 1995
----------------
Total sales
  and revenues ..............      $6,152        $   235         $6,326
Operating profit ............         844             80            869
Depreciation and amortization          75              6             81
Capital expenditures ........         139              -            139
Identifiable assets .........       2,533          1,922          4,081


October 31, 1994
----------------
Total sales and revenues ....      $5,171        $   214         $5,330
Operating profit ............         659             76            685
Depreciation and amortization          68              4             72
Capital expenditures ........          87              -             87
Identifiable assets .........       2,355          1,582          3,678

     Intersegment sales and revenues were not material in 1996, 1995 or
1994.  Transactions between manufacturing operations and financial
services operations have been eliminated from the consolidated column.

<PAGE>
         <PAGE 39>

                               ==========
               NOTES TO FINANCIAL STATEMENTS--(Continued)


16.  SHAREOWNER'S EQUITY

     The number of authorized shares of Transportation's capital stock at
October 31, 1996 was 100,000 with a par value of $1.00 per share and the
number of issued and outstanding shares was 1,000.  All the issued and
outstanding stock is owned by Navistar International Corporation and no
shares are reserved for officers and employees or for options, warrants,
conversions and other rights.

     Shareowner's equity for the years ended October 31 is as follows:

Millions of dollars                      1996        1995        1994
-----------------------------------------------------------------------
Common Stock .......................    $   786     $   786    $    786
                                        -------     -------     -------

Retained earnings (deficit)
Balance at beginning of the year ...     (2,307)     (2,283)     (2,304)
Net income (loss) ..................        (41)        102           7
Minimum pension liability
  adjustment/other ................          33        (127)         14
                                        -------     -------     -------
Balance at end of the year ........      (2,315)     (2,308)     (2,283)
                                        -------     -------     -------

Total shareowner's equity .........     $(1,529)    $(1,522)    $(1,497)
                                        =======     =======     =======

17.  SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
                              1st               2nd               3rd             4th
                            Quarter           Quarter           Quarter         Quarter
                        --------------  ----------------   ---------------  ----------------

(Millions of dollars)   1996     1995     1996     1995     1996     1995     1996     1995 
--------------------------------------------------------------------------------------------
<S>                    <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Sales and revenues ... $1,427   $1,413   $1,474   $1,635   $1,383   $1,510   $1,447   $1,768
                       ======   ======   ======   ======   ======   ======   ======   ======

Manufacturing gross
  margin .............   12.2%    12.4%    13.7%    14.0%    12.6%    14.0%    11.6%    14.4%
                       ======   ======   ======   ======   ======   ======   ======   ======

Net income (loss) .... $    6   $    7   $   (2)  $   37   $   (9)  $   18   $  (36)  $   40
</TABLE>
<PAGE>
         <PAGE 40>

                                       =========
                       NOTES TO FINANCIAL STATEMENTS--(Continued)


18.  SUPPLEMENTAL FINANCIAL INFORMATION,
     AS OF OCTOBER 31 AND FOR THE YEARS THEN ENDED (Unaudited)

Navistar International Transportation Corp. (with financial services
operations on an equity basis).
(Millions of dollars)

<TABLE>
<CAPTION>

Condensed Statement of Income                      1996           1995           1994
--------------------------------------------      ------         ------         ------
<S>                                               <C>            <C>            <C>
Sales of manufactured products .............      $5,508         $6,125         $5,153
Other income ...............................          19             27             18
                                                  ------         ------         ------
     Total sales and revenues ..............       5,527          6,152          5,171
                                                  ------         ------         ------

Cost of products and services sold .........       4,819          5,281          4,494
Postretirement benefits ....................         219            205            175
Engineering and research expense ...........         129            113             97
Marketing and administrative expense .......         282            277            237
Other expenses .............................         165            180            166
                                                  ------         ------         ------
Total costs and expenses ...................       5,614          6,056          5,169
                                                  ------         ------         ------
Income (loss) before income taxes
  Manufacturing operations .................         (87)            96              2
  Financial services operations ............          83             62             60
                                                  ------         ------         ------
    Income (loss) before income taxes ......          (4)           158             62
Income tax expense .........................         (37)           (56)           (22)
                                                  ------         ------         ------
Income (loss) of continuing operations .....         (41)           102             40
Loss of discontinued operations ............           -              -            (33)                                 
                                                  ------         ------         ------
Net income (loss) ..........................      $  (41)        $  102         $    7
                                                  ======         ======         ======

Condensed Statement of Financial Condition         1996           1995
---------------------------------------------     ------         ------
Cash, cash equivalents
  and marketable securities .................     $  174         $  504
Inventories .................................        463            416
Property and equipment net ..................        666            642
Equity in Financial Services subsidiaries ...        306            282
Other assets ................................        632            689
                                                  ------         ------
     Total assets ...........................     $2,241         $2,533
                                                  ======         ======

  Accounts payable ..........................     $  772         $  876
  Postretirement benefits liabilities .......      1,344          1,334
  Other liabilities .........................      1,654          1,845
  Shareowner's equity .......................     (1,529)        (1,522)
                                                  ------         ------
     Total liabilities
       and shareowner's equity ..............     $2,241         $2,533
                                                  ======         ======

Condensed Statement of Cash Flow                   1996           1995           1994
---------------------------------------------     ------         ------         ------
Cash flow from operations
Net income (loss) ...........................     $  (41)        $  102         $    7
Adjustments to reconcile net income (loss)
  to cash provided by (used in) operations:
     Depreciation and amortization ..........         90             75             68
     Equity in earnings of nonconsolidated
       companies, net of dividends received .        (24)           (28)           (10)
     Other, net .............................          3            (68)            23
Change in operating assets and liabilities ..       (180)           192             62
                                                  ------         ------         ------
Cash provided by (used in) operations .......       (152)           273            150
                                                  ------         ------         ------

Cash flow from investment programs
Purchase of marketable securities ...........       (158)          (196)          (409)
Sales or maturities of marketable securities.        239            145            431
Capital expenditures ........................       (117)          (139)           (87)
Other investment programs, net ..............         (3)             5            123
                                                  ------         ------         ------
Cash provided by (used in) investment programs       (39)          (185)            58
                                                  ------         ------         ------

Cash flow from financing activities .........        (57)           (66)           (74)
                                                  ------         ------         ------
Cash and cash equivalents
Increase (decrease) during the year .........       (248)            22            134
At beginning of the year ....................        418            396            262
                                                  ------         ------         ------
Cash and cash equivalents at end of the year      $  170         $  418         $  396
                                                  ======         ======         ======
</TABLE>

<PAGE>
         <PAGE 41>


               NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
                      AND CONSOLIDATED SUBSIDIARIES
               -------------------------------------------


                      INDEPENDENT AUDITORS' REPORT
                      ----------------------------


Navistar International Transportation Corp.:


     We have audited the financial statements and financial statement
schedule of Navistar International Transportation Corp. and Consolidated
Subsidiaries listed in Item 8 and Item 14 These consolidated financial
statements and financial statement schedule are the responsibility of
Transportation's management. Our responsibility is to express an opinion
on these consolidated financial statements and financial statement
schedule based on our audits.

     We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements.  An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable
basis for our opinion.

     In our opinion, the accompanying consolidated financial statements
present fairly, in all material respects, the financial position of
Navistar International Transportation Corp. and Consolidated Subsidiaries
at October 31, 1996 and 1995, and the results of their operations and
their cash flow for each of the three years in the period ended October
31, 1996, in conformity with generally accepted accounting principles. 
Also, in our opinion, the financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth
therein.



Deloitte & Touche LLP
December 16, 1996
Chicago, Illinois

<PAGE>
         <PAGE 42>


               NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
                      AND CONSOLIDATED SUBSIDIARIES
               -------------------------------------------


                      INDEPENDENT AUDITORS' CONSENT
                      -----------------------------


Navistar International Transportation Corp.:

     We consent to the incorporation by reference in Post-Effective
Amendment No. 1 to Registration  No. 2-70979 of Navistar International
Transportation Corp. on Form S-8 of our reports on Navistar International
Transportation Corp. and Navistar Financial Corporation dated December 16,
1996, appearing and incorporated by reference in this Annual Report on
Form 10-K of Navistar International Transportation Corp. for the year
ended October 31, 1996. 


Deloitte & Touche LLP
January 22, 1997
Chicago, Illinois

<PAGE>
         <PAGE 43>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

         None
                                   PART III


ITEMS 10, 11, 12 AND 13

     Intentionally omitted.  See the index page to this Report for
explanation.


                                   PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE  AND REPORTS ON FORM 8-K

Financial Statements
--------------------

    See Index to Financial Statements in Item 8.

Schedule                                                     Page
--------                                                     ----

    II  - Valuation and Qualifying Accounts
            and Reserves ..........................           F-1

     All other schedules are omitted because of the absence of the
conditions under which they are required or because information called for
is shown in the financial statements and notes thereto.

Exhibits, Including those Incorporated by Reference          Page
---------------------------------------------------          ----

(3)    Articles of Incorporation and By-Laws ......           E-1
(4)    Instruments Defining the Rights
         of Security Holders, including Indentures.           E-2
(10)    Material Contracts ........................           E-3
(23)    Independent Auditors' Consent
(24)    Power of Attorney
(27)    Financial Data Schedule ...................           N/A
(28.1)  Navistar Financial Corporation Annual Report
         on Form 10-K for the fiscal year ended
         October 31, 1996 ..........................          N/A


     All exhibits other than those indicated above are omitted because of
the absence of the condition under which they are required or because
information called for is shown in the financial statements and notes
thereto.

Reports on Form 8-K
-------------------

     No reports on Form 8-K were filed for the three months ended October
31, 1996.

<PAGE>
         <PAGE 44>
SIGNATURE


               NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
                      AND CONSOLIDATED SUBSIDIARIES
               -------------------------------------------


                                 SIGNATURE


     Pursuant to the requirements of Section 13 and 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.



NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
-------------------------------------------
               (Registrant)



/s/   J. Steven Keate
-----------------------------------
      J. Steven Keate                                  January 22, 1997
      Vice President and Controller
      (Principal Accounting Officer)

<PAGE>
         <PAGE 45>
SIGNATURE


               NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
                      AND CONSOLIDATED SUBSIDIARIES
               -------------------------------------------
                            POWER OF ATTORNEY


     Each person whose signature appears below does hereby make,
constitute and appoint John R. Horne, J.  Steven Keate and Robert A.
Boardman and each of them acting individually, true and lawful attorneys-
in-fact and agents with power to act without the other and with full power
of substitution, to execute, deliver and file, for and on such person's
behalf, and in such person's name and capacity or capacities as stated
below, any amendment, exhibit or supplement to the Form 10-K Report making
such changes in the report as such attorney-in-fact deems appropriate.

                                 SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:

    Signature                      Title                     Date
----------------------    ---------------------------  -----------------

/s/ John R. Horne
----------------------
    John R. Horne         Chairman, President          January 22, 1997
                            and Chief Executive
                            Officer and Director
                            (Principal Executive
                             Officer)


/s/ Robert C. Lannert
----------------------
    Robert C. Lannert     Executive Vice President     January 22, 1997
                            and Chief Financial
                            Officer and Director
                            (Principal Financial
                             Officer)

<PAGE>
         <PAGE 46>
<TABLE>
<CAPTION>
                                                                                               SCHEDULE II

                                NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
                                       AND CONSOLIDATED SUBSIDIARIES
                                                ============
                              VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                           FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
                                          (MILLIONS OF DOLLARS)




                 COLUMN A               COLUMN B       COLUMN C                COLUMN D            COLUMN E
                 --------               --------       --------                --------            --------

                                         BALANCE                            DEDUCTIONS FROM
                DESCRIPTION                 AT                                  RESERVES           BALANCE
      DESCRIPTION                       BEGINNING  ADDITIONS CHARGED                               AT END
      OF RESERVES      DEDUCTED FROM     OF YEAR       TO INCOME        DESCRIPTION      AMOUNT    OF YEAR
      -----------      -------------    ---------  -----------------    -----------      ------    -------
<S>                    <S>                 <C>         <C>        <S>                     <C>       <C>
Reserves deducted from
  assets to which they
  apply:


          1996
          ----
                                                                   Uncollectible notes
                                                                     and accounts
    Allowance for                                                    written off and
      losses on        Notes and accounts                            reserve adjustments,
      receivables ....   receivable ....   $  28          $  21      less recoveries ...   $  18    $  31
                                           =====          =====                            =====    =====


          1995
          ---- 
                                                                   Uncollectible notes
                                                                     and accounts
    Allowance for                                                    written off and
      losses on        Notes and accounts                            reserve adjustments,
      receivables ....   receivable ....   $  25          $   4      less recoveries ...   $   1    $  28
                                           =====          =====                            =====    =====

          1994
          ----
                                                                   Uncollectible notes
                                                                     and accounts
    Allowance for                                                    written off and
      losses on        Notes and accounts                            reserve adjustments,
      receivables ....   receivable ....   $  36          $   2      less recoveries ...   $  13    $  25
                                           =====          =====                            =====    =====
</TABLE>























                                                 F-1